CARETAKING AND LETTING AGREEMENT ESSENTIALS

03 March 15

 PART 4: KEYS TO THE KINGDOM

This month I will look at another issue that raises its head as a cause of conflict and dispute between Owners Corporations, caretakers and owners – the operation of an electronic key system for the building. Caretakers can find themselves stuck in the middle when it comes to enforcing the wishes of the Executive Committee and the practical issues and costs of operating an electronic key system.


Disputes about keys are generally due to one or more of the following issues:

 

  • The Owners Corporation does not have sufficient authority in the by-laws to operate an electronic key system that requires owners to pay a deposit and/or other fees to obtain keys;
  • The caretaking agreement does not state clearly how the caretaker is to operate a key system on behalf of the Owners Corporation;
  • A lack of clarity when determining who pays the costs of operating and maintaining an electronic key system.

Where the Owners Corporation does not have a clear authority to operate a key system, it means there is no authority for the caretaker to operate a system on behalf of the Owners Corporation or collect fees from owners. Often, the fact that the Owners Corporation does not have authority is overlooked by owners (usually because it’s a house rule created after the scheme is up and running), but all it takes is one owner refusing to pay a key deposit and the house of cards falls down, usually on the caretaker first.


This issue is best resolved by the Owners Corporation creating a by-law that clearly states that the Owners Corporation will operate a key system which will be managed by the caretaker. The by-law should also state in some detail what fees may be payable by individual owners when utilising this system. A well worded by-law will mean owners can’t accuse the caretaker of holding keys to ransom or unjustifiably profiting from the system, as all the caretaker is doing is operating under the terms of the by-laws and their management agreement with the Owners Corporation.


When the Owners Corporation has the authority to run a key system and passes that duty onto the caretaker, problems arise when the caretaking agreement or the committee do not provide a clear understanding of how the caretaker is to manage the system. Creating a key register, holding deposits in trust accounts, issuing replacement keys and collecting fees from owners; these tasks may seem obvious at first but, when the caretaking agreement does not specifically require the caretaker to do all these things, has the caretaker breached the caretaking agreement when they manage the system “their” way? If the committee aren’t happy with the caretaker, failing to keep a detailed key register could be the opportunity they are looking for to issue a breach notice.


As with any agreement, a lack of clarity over what has been agreed will inevitably lead to a dispute. Merely having a by-law that authorises the collection of fees by the caretaker will not be enough to avoid disputes unless the by-law and caretaking agreement also set out the amounts of those fees, or at least a guide to determining those fees. The types of questions owners should be able to answer by referring to the by-laws and caretaking agreement:

 

  • Who pays for the cost of establishing the system?
  • Who pays (and how much) for each key, and any replacements?
  • Are the costs of operating the system included in the caretaker’s remuneration?

If you can’t answer these questions with respect to your building then it is likely that sooner rather than later you will be hearing these questions being voiced at your Owners Corporation meetings.


Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.
 

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